Prime Minister Julia Gillard rebuffed her predecessor Kevin Ruddon Friday after backbench MPs supported his comment that Labor would be heartless not to approve a rise in the dole when it had abandoned its pledge to return the budget to surplus.

Ms Gillard rejected Mr Rudd’s provocative entry into a debate that is already dividing Labor and stoking leadership tensions, saying the best outcome for unemployed people was to find a job.

Earlier, Mr Rudd backed growing calls by backbenchers, welfare groups and the Business Council of Australia for an increase in the Newstart allowance, the primary welfare payment for the unemployed.

“I’m just saying we are the Labor party, we are a Labor government, we have got responsibility for people who are doing it tough and people who need a bit of a hand up, and therefore, we could be doing more," Mr Rudd told ABC Radio. “I think people need to show a bit more of a heart."

Ms Gillard faced questions on the comments as she announced the terms of reference of a royal commission into child sex abuse.

“I’ve dealt with this question before and indicated it’s very tough for people on low and fixed incomes to make ends meet. We keep our focus on creating jobs because the best thing we can do for anybody who’s experiencing unemployment is to make sure that there’s a job available for them," she said.

Treasurer Wayne Swan’s office, when asked about Mr Rudd’s comments yesterday, referred to a press conference Mr Swan gave on January 3, on the Sunshine Coast, where he pointed to the 800,000 jobs Labor had created.

“So it’s tough to get by on the dole, but the government’s objective is to make sure that people get into work as quickly as they possibly can, and that’s been our objective," Mr Swan said

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Families Minister Jenny Macklinhas apologised for saying last week that she could survive on the $35-a-day Newstart, admitting her comment was “insensitive" and that the dole payment would be very hard to live on.

“I do acknowledge that my remarks were insensitive and I’m certainly very sorry for that," Ms Macklin said in Sydney yesterday.

“I do understand that it is very hard to live on a very low income, including unemployment benefits."

“I think we’ve got to have a concrete plan to raise the rate of Newstart, when you’ve got organisations as diverse as the Business Council of Australia and Australian Council of Social Service saying it’s too low and the Business Council of Australia saying basically they believe the level is so low it can harm a person’s capacity to re-enter the workforce.

“Any government which is interested in participation should be prioritising this."

Mr Jones said efforts to convince Cabinet to include the matter in its budget priorities were ongoing.

“There is a budget process in the lead up to the May budget and me – and I know other colleagues – think a plan to increase the level of Newstart should be a part of that.

Senator Cameron has long supported an increase.

“What fundamentally motivates me is that I do not agree with the proposition that you force people into abject poverty as an incentive to getting a job," he told the Weekend Australian Financial Review. “I don’t think Labor should have a bar of it.

A majority report by the Senate Education, Employment and Workplace Relations References Committee tabled in November questioned whether, at $35 a day for singles, the Newstart allowance was sufficient to provide a decent standard of living for anything but a short period.

But the report did not recommend an increase in the allowance.

Rather, people should be better supported to transition into full-time, paid work, it said.